Sizing a position from a stop, worked through with real numbers
A one percent risk rule caps what a single trade can cost you. It says nothing about what a losing streak costs, and the gap between those two things is worth walking through with a calculator rather than taking on faith.
The written spec for Tenachine's turtle 55 breakout study includes one exact instruction: size the position so that hitting the stop loses exactly one percent of account equity. That sentence is the whole discipline of sizing from a stop, and it is worth taking apart with an actual account and an actual stock rather than nodding along.
Start with an account worth 50,000 dollars. One percent of that is 500 dollars, the most this one trade is allowed to cost if the stop is hit. The strategy enters on a new 55 day high, measures the 14 period average true range, and places the stop two ATR below entry. Say the stock trades at 120 dollars and its 14 period ATR is 3.20 dollars. The stop sits two times 3.20, or 6.40 dollars, below entry, at 113.60. Divide the 500 dollars of allowed risk by the 6.40 dollar stop distance and you get 78.125 shares. Round down, since a broker will not sell you a fraction of one: 78 shares.
Multiply that out. 78 shares at 120 dollars is 9,360 dollars, a little under 19 percent of the account, sitting in one stock, to express a trade that is only allowed to cost 1 percent if it goes wrong. That gap, 19 percent of capital deployed to risk 1 percent of capital, is the entire point of sizing from a stop rather than sizing from a fixed number of shares or a fixed dollar amount. The position size is a function of how far away the stop is, not a round number picked in advance.
Change one input and the gap moves. Same account, same 120 dollar stock, but suppose the ATR is 1.60 dollars instead of 3.20, a calmer stock. The stop is now two times 1.60, or 3.20 dollars away, at 116.80. Divide 500 by 3.20 and you get 156 shares, worth 18,720 dollars, or about 37 percent of the account. Half the volatility bought roughly double the position, and the dollar risk in both cases is identical: 500 dollars if the stop is hit. Sizing from a stop makes the position bigger when the stock is calmer and smaller when it is wilder, automatically, which is the mechanism doing the work, not a side effect of it.
None of that touches the question a one percent rule sounds like it answers but does not: what happens across a losing streak, not a single trade. If each loss costs one percent of whatever the account is worth at the time, ten straight losses do not cost ten percent, they compound down slightly less than that, but the arithmetic still adds up fast.
The turtle 55 breakout study's published win rate is 34.96 percent, meaning almost two of every three trades lose. Across a few dozen trades on one ticker, a run of eight to ten losses in a row at that hit rate is an ordinary event, not a tail risk, the same point Tenachine's guide on reading a win rate makes about trend followers generally. The one percent rule was never designed to prevent that streak from happening. It was designed to make sure that when it happens, it costs a predictable, survivable amount instead of an unpredictable one.
That is the actual boundary of what sizing from a stop buys you. It fixes the dollar cost of being wrong once. It does not fix how many times in a row you can be wrong, how deep the resulting drawdown gets, or whether you can sit through that drawdown without abandoning the rule at the worst possible moment. Those are separate questions, worth separate answers, and a single percentage in a strategy spec was never going to carry all three.
Past performance is not indicative of future results, and the account, the stock, and the ATR in the worked example above are illustrative numbers chosen to show the arithmetic, not a real trade from this or any study.